In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principle way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

Interested in finding out more? Take a look at the Quarterly Bulletin article: https://www.bankofengland.co.uk/quart...